News

How Banks In NYC Leave The Unbanked Behind

In the year since the municipal identification card debuted in New York City, more than 670,000 people have signed up, with at least one of the program’s goals being that many of them will open bank accounts.

Yet, there is a fly in the ointment, reported The New York Times on Wednesday (Dec. 23). The fact remains that some of the biggest banks in the city, ranging from Bank of America to Citigroup, will not accept the cards as a primary identification source, even though that practice has indeed taken root at smaller lenders and also at the federal regulators that have said they can be used.

The upshot is that there are thousands of undocumented New Yorkers and others on what NYT said comprise “the margins of the financial system.” Many must resort to nontraditional banking alternatives, such as check cashing services, which can put a dent in what a worker can take home.

This runs counter to the stated mission those same banking firms, and others, have embraced publicly, which seeks to offer basic banking services to the roughly 9 million homes that have neither savings nor checking accounts and are thus defined as unbanked.

The banks themselves have to contend with combating fraud and money laundering efforts, said NYT, with fines that can be quite hefty in the event that lenders are found liable for not safeguarding funds.

Ultimately, the decision to accept the New York City cards rests with the lender. Bank of America allows the cards to be used as secondary identification, with Citi to follow suit with the same allowance. JPMorgan, thus far, does not accept the card, even as roughly 35 percent of its branches in the city are located in low- and moderate-income neighborhoods.

Some critics have charged that the banks are choosing to not accept the cards as primary IDs because lower-income residents are not that attractive to a bank’s bottom line.

——————————-

LATEST PYMNTS REPORT: B2B API TRACKER  

B2B APIs aren’t just for large enterprises anymore — middle-market firms and SMBs now realize their potential for enabling low-cost access to real-time payments and account data. But those capabilities are only the tip of the API iceberg, says HSBC global head of liquidity and cash management Diane Reyes. In this month’s B2B API Tracker, Reyes explains how the next wave of banking APIs could fight payments fraud and proactively alert middle-market treasurers to investment opportunities.

TRENDING RIGHT NOW